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The Effects of Health and Health Shocks on Hours Worked

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Author Info
Cai, Lixin () (Melbourne Institute of Applied Economic and Social Research)
Mavromaras, Kostas G. () (University of Melbourne)
Oguzoglu, Umut () (University of Manitoba)

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Abstract

We investigate the impact of health on working hours in recognition of the fact that leaving the labour market due to persistently low levels of health stock or due to new health shocks, is only one of the possibilities open to employees. We use the first six waves of the HILDA survey to estimate the joint effect of health status and health shocks on working hours using a dynamic random effects Tobit model of working hours to account for zero working hours. We follow Heckman (1981) and approximate the unknown initial conditions with a static equation that utilizes information from the first wave of the data. Predicted individual health stocks are used to ameliorate the possible effects of measurement error and endogeneity. We conclude that overall lower health status results in lower working hours and that health shocks lead to further reductions in working hours when they occur. Estimation results show that the model performs well in separating the time-persistent effect of health stock (health status) and the potentially more transient health shocks on working hours.

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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3496.

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Date of creation: May 2008
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Handle: RePEc:iza:izadps:dp3496

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Related research
Keywords: health shocks; health; working hours; Tobit estimation;

Find related papers by JEL classification:
J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
I10 - Health, Education, and Welfare - - Health - - - General
C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data

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References listed on IDEAS
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  1. Disney, Richard & Emmerson, Carl & Wakefield, Matthew, 2006. "Ill health and retirement in Britain: A panel data-based analysis," Journal of Health Economics, Elsevier, vol. 25(4), pages 621-649, July. [Downloadable!] (restricted)
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  2. Bound, John & Schoenbaum, Michael & Stinebrickner, Todd R. & Waidmann, Timothy, 1999. "The dynamic effects of health on the labor force transitions of older workers," Labour Economics, Elsevier, vol. 6(2), pages 179-202, June. [Downloadable!] (restricted)
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  3. Gerdtham, U. -G. & Johannesson, M. & Lundberg, L. & Isacson, D., 1999. "A note on validating Wagstaff and van Doorslaer's health measure in the analysis of inequalities in health," Journal of Health Economics, Elsevier, vol. 18(1), pages 117-124, January. [Downloadable!] (restricted)
  4. Nicole Watson & Mark Wooden, 2004. "The HILDA Survey Four Years On," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 37(3), pages 343-349, 09. [Downloadable!] (restricted)
  5. Mark Wooden & Robert Drago, 2007. "The Changing Distribution of Working Hours in Australia," Melbourne Institute Working Paper Series wp2007n19, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne. [Downloadable!]
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